Protecting against predatory mortgage lending

This article is the second in a five-part series on home mortgages written in collaboration . with loan officer Peggy Ryan.

BY AUDRA OTTO

Before applying for a mortgage loan or home equity loan, borrowers should protect their assets by making themselves aware of common unethical lending practices. Unfair lending practices range from equity stripping and loan flipping to hiding loan terms and packing a loan with extra charges. (A multitude of rampant mortgage scams to watch out for will be detailed in next month's article.) Although exploitative lenders will prey on any borrower who is.unfamiliar with the mortgage process or experiencing financial distress, they tend to target the disadvantaged segments of society, including the elderly, racial minority groups, and people with low income or poor credit.

• There are several measures you can take to protect against predatory lending. The most essential line of defense is the homebuyer workshop.
  
  Homebuyer education classes provide you with an awareness of all available options and the v ability to spot potential warning signs during the lending process, thereby allowing you to make confident, informed decisions throughout the mortgage process. Taking advantage of free home ownership counseling is another useful way to protect against abusive lending practices. Counseling can be helpful for current homeowners as well as first-time homebuy-ers.
  Additionally, homebuyers should heed the following advice:
  
  • Don't agree to a home equity loan if you lack the income to make the monthly payments.
  • Don't allow a lender to pressure you into signing a document. If you feel uncomfortable, trust your gut instinct.
  • Don't lock into an interest rate if you do not fully understand the costs of your loan. It takes several weeks to close a loan and therefore the loan officer can wait for you to make a confident decision. Never rush into a transaction.
  • Don't sign any document without reading it thoroughly.
  • Don't sign any document that has blank spaces to be filled in after you sign.
  • Don't agree to a loan that includes credit insurance or extra products you are not sure you want.
  • Don't let promises of extra cash or lower monthly payment distract you from actual cost of a loan.
  • Don't deed your property to anyone. First consult an attorney or another knowledgeable person you trust.
  • Don't become desperate if your request for a loan is denied by a lender. Rather than making risky decisions, seek out second opinion or visit a local nonprofit to see what your options are.

Another helpful reminder: If you are entering into a refinance agreement, you have three days after signing the final loan documents (the mortgage and note) to cancel the transaction. There is a cost associated with canceling the transaction, but in most cases, the cost should not exceed 3% of the loan amount.